VSN
I got a whole bunch.. .......
CG on VSN :
HIGH PROJECT DEVELOPMENT COSTS REDUCE CASH FLOW ESTIMATES
Investment recommendation
Veresen reported second quarter recurring cash flow of $0.23 per share,
below our $0.27 estimate and the $0.29 consensus estimate. We note
that the company generated $4.2 million, or just over $0.02 of marginbased
lease revenue at Aux Sable in the second quarter that it did not
recognize. The Hythe/Steeprock natural gas processing facilities, the
Alberta Ethane Gathering System and Alliance Pipeline all delivered
cash flow above that recorded in the second quarter of 2012. As
expected, continued low ethane and propane-plus margins negatively
impacted cash flow in the second quarter; however, if frac spreads
remain at current levels or improve during the remainder of the year,
we expect the company could recognize an incremental $0.10 of marginbased
cash flow in the second half of the year. The company has
narrowed its 2013 distributable cash flow guidance range, raising the
lower end of the range by $0.03. The new guidance range stands at
$1.00-1.15 per share versus $0.97-1.15 per share, previously. However,
business development costs are expected to reach ~$31 million in 2013,
which is materially above our forecast. We suspect that with the
development opportunities management is currently evaluating in the
Midstream and Power divisions, as well as the Jordan Cove LNG project,
the high level of project development costs may continue for some time,
reducing our cash flow per share estimates. We are lowering our 2013
and 2014 CFPS estimates by $0.10 for each year to $1.10 and $1.20,
respectively, from $1.20 and $1.30 to reflect the impact of higher than
expected project development costs. As a result of this reduction and the
impact on our net asset value estimate, we are reducing our target price
to C$13.50 from C$14.00. We continue to rate the stock a BUY. We
believe the stock has seen some weakness due to bond yield increases
and continued concern over the sustainability of the company’s $1.00 dividend.
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